MNCs corruption: As Indian cos go global, anti-graft laws likely to affect them in different countries

MNCs meanwhile face their own set of problems. One the one hand, they have a set of anti-graft laws, like the UK Bribery Act which came into force this July, that are getting stricter. "Under the UK Bribery Act, a company can be prosecuted even if an 'associated person' bribes a foreign official," says Goldsmith. "An associated person could be a third party like the employee of a PR agency, an employee of a joint venture etc," he adds. The act also enlarges the definition of a bribe to include hospitality related expenses. "We get inquiries from clients if it is okay for them to give out or accept hospitality passes for the Wimbledon championships," adds Goldsmith.

At the same time, in countries like India, it is almost the norm for companies to give gifts to government employees on festive occasions such as Diwali. A consultant familiar with the Diageo matter said that most of the payments made to officials were just 'routine incentives' paid to Delhi Corporation's stores' employees to increase visibility of the company's products. "How else could have the SEC got details about the hundreds of payments the company made to them? They were not bribes," says the official.

At the same time, given the corrupt procurement practices in government departments, MNCs which don't pay bribes are seriously disadvantaged. "Indian companies are governed by a different set of laws. When it comes to public procurement, Indian companies (those that pay bribes) have a business advantage over their MNC counterparts, as the lack of Indian legislation that covers the grey areas like gifting and third party payments helps their cause," says the legal counsel for a leading corporate.

It's an advantage that won't last long, say legal eagles. India ratified the UN convention against corruption in May this year and is likely to sign the OECD convention sometime sooner than later. Moreover, as Indian companies go global, laws like the UK Bribery Act are likely to affect them. For example, an Indian company which pays a bribe in Africa could be prosecuted in the UK, provided it is listed in the UK or even has a subsidiary in the country. "With Indian companies going global, and considering the stringent requirements of UK Bribery Act, these companies would need to monitor the activities of their partners and agents to mitigate the risk of non-compliance with the law," says Neeta Potnis, senior director, Deloitte Touche Tohmatsu India.

Other than signing these conventions, what else can India do to tackle the menace of graft? "Look at the FMCG sector," says Adi Godrej, president-designate, Confederation of Indian Industry (CII), and chairman of CII's task force on transparency and integrity in governance. "There is hardly any corruption in the sector because one does not have to constantly go to the government to seek permissions there. Lesser the government control, lower the levels of corruption. I think one way of tackling corruption is by simplifying government procedures and making the process of approvals more transparent."